When the COVID-19 pandemic was at its peak, the Ohio Living Westminster-Thurber retirement community in Columbus saw staff leave, expenses rise and the burden of caring for residents increase.
“Finding the personal protective equipment was challenging. Just dealing with the various changes in regulations and requirements that were coming out, normally on a daily basis… was packed,” said Bob Stillman, chief financial officer at Ohio Living. “We were offering appreciation pay for hours’ work. Our overtime hours skyrocketed.”
Like other skilled nursing facilities, those under Ohio Living were financially ravaged by COVID-19. Almost 45% of Ohio Living residents pay with Medicaid, one of the largest payers in the long-term care market. But Medicaid’s government-set rates often don’t cover the full costs.
“It’s very, very challenging to basically be on a fixed reimbursement over that extended time, have a labor shortage, significant prices, and be trying to compete for basically the same staff from site to site,” said Stillman.
For example, the beginning hourly rate for nurse aides at Westminster-Thurber is approaching $15 a hour, but it’s reimbursed at 2014 levels when pay was $11.50 a hour. That’s just starting pay. Patterns are similar for other positions.
Now, overdue money for homes like Westminster-Thurber will soon be flowing in to help alleviate the situation.
With the state budget signed into law earlier this month, the Ohio Department of Medicaid is currently going through its process to set new Medicaid reimbursement rates for nursing homes.
“Rebasing” is a mundane process required by state law to happen every five years. But this time, it’s especially critical.
Bridging the gap
Currently, nursing facilities in the state are reimbursed through Medicaid according to rates set in 2016 from 2014 cost data. That’s on average $212 per patient per day.
The industry has long complained about the funding gap resulting from setting rates on outdated cost data, asking instead for adjustments yearly. But with COVID-19, that gap has widened to levels not seen before, causing unprecedented financial strain.
“What other industry is asked to provide an undeniably critical service but paid based on seven-year-old prices?” said Kathryn Brod, president of LeadingAge Ohio, which advocates for nonprofit long-term care facilities. “Nursing homes are still operating in pandemic mode, and will be one of the last sectors to return to normal.”
This year’s rate adjustments, however, will be based on 2019 cost data, the most recently available year. It won’t take into account the increased pandemic-related costs that occurred over 2020 and later.
The difference between 2014 and 2016 costs was only around 3%, estimated Pete Van Runkle, head of the Ohio Health Care Association. The difference this time between 2019 and 2021 costs could be up to around 25%.
It’s the reason Gov. Mike DeWine had initially proposed delaying the process for another two years, to fully account for COVID-19 costs. But lawmakers, on behalf of the nursing home industry, put it back on schedule.
“It was really important that we get rebasing done at all, because it partially bridged that gap,” said Van Runkle. “Otherwise, we’d be talking about a much larger gap between 2014 and 2021” that nursing facilities have to operate on.
As for how to bridge that remaining, large gap between 2019 and current costs? The industry is eyeing some of the state’s share of COVID-19 relief funds, said Van Runkle.
The deadline for rebasing has actually passed — July 1, the day DeWine signed it into law.
The process is currently underway, and the Ohio Department of Medicaid has until early August before bills for July rates are sent out.
Nobody has solid numbers yet on what the new reimbursement rates will be, nor how much the new rebasing process will fully cost. State legislators have put a cap on the total spending, earmarking $125 million a year — well short of fully funding the rebasing, which could cost up to $250 million.
The last rebasing was fully funded, but priorities like tax cuts this time around took precedence. Lawmakers had also increased quality incentive payments for nursing facilities and reimbursements for at-home care.
“It’s a lot of money. It’s one of the bigger things that they make choices about during the operating budget,” said Susan Wallace, chief policy officer at LeadingAge Ohio, on rebasing. “I think that sticker shock, it just happens every time around because of the size of this spend.”
With the limited funding, an order of what rates gets updated was put in for the first time. Direct care costs get rebased first, then ancillary costs and lastly tax costs. But given the partial funding, lower priority costs may not even get new reimbursement rates at all.
In other words, it’s very likely for facilities to be paying 2021 taxes but still reimbursed at the 2014 rate.
Another change is that capital costs, such as building renovations or equipment, have been excluded entirely from the process and will not get any updated reimbursement rates. Some lawmakers had concerns that some landlords were charging exorbitant rents and taking advantage of Medicaid, said Van Runkle.
Nursing facilities expressed disapproval with how lawmakers tackled that concern.
“It’s so dis-incentivizing, not necessarily for Ohio Living but other providers, from spending money on the facility itself,” said Stillman.
A committee will be appointed to look at the whole Medicaid reimbursement system, when this issue could be better addressed. The discussion whether to fully fund rebasing could also come up in the next state budget, said Wallace.
More money for staffing
Updated rates would pay huge dividends when it comes to trying to meet quality metrics, the industry said, particularly with issues like pay and understaffing.
“High-Medicaid nursing homes are often located in Ohio’s rural areas and urban centers, areas already experiencing disparities in access and health outcomes,” Brod said.
Benefits for underpaid and understaffing issues seem to be guaranteed. The state budget bill has a brand new provision requiring facilities to use 70% of any additional money from rebasing to be used for “direct care costs” such as staff salaries.
If a provider gets $10 more under the new reimbursement rates, for instance, the Medicaid department would need to see a $7 increase in direct care. Ohio will be monitoring homes to ensure compliance, said Joan Schlagheck, the Medicaid department’s chief of long-term care rate setting.
Advocates for nursing home residents cheered this, but said it’ll be more than just simply increasing salaries. Owners should use any money increases to better the quality of work life to retain staff.
“That’s one of the things that we saw in the pandemic, was that because nurse aides aren’t paid enough, they would have jobs in multiple nursing homes and travel from one facility to another,” said the state’s long-term care ombudsman Beverly Laubert. “We need to keep people where they are and pay them a living wage. Make the jobs better. Give them greater respect.”
Many of the complaints Laubert has received can be traced to understaffing, she said, such as slow responses to requests for assistance, little help with personal hygiene or unattended symptoms.
The nursing home industry also sees the new requirement as a positive but says it’s no panacea. With rebasing based on 2019 cost data, the unusually high wage increases caused by workforce shortages during the pandemic won’t be accounted for. And like other industries, homes are still desperately trying to attract workers.
In 2014, for instance, staff retention rate was 67% for Westminster-Thurber. Last year, it dipped to 59%.
Stillman said he appreciates any help rebasing can provide. But the current problems Ohio Living faces are likely to continue, and any gaps between full funding and what is reimbursed will have to be plugged with either philanthropy, cutting down on serving Medicaid patients or simply cutting costs like staffing.
“We’re having more and more turnover, and we’re spending more money to recruit and more money to train and more money in hourly rates to attract,” he said. “So I don’t see that going away anytime soon.”
Titus Wu is a reporter for the USA TODAY Network Ohio Bureau, which serves the Columbus Dispatch, Cincinnati Enquirer, Akron Beacon Journal and 18 other affiliated news organizations across Ohio.